THIS CONTAINS INFORMATION ISSUED BY THE U.S. ADMINISTRATION FOR CHILDREN AND
FAMILIES IN LIHEAP INFORMATION MEMORANDUM TRANSMITTAL NO. LIHEAP-IM-2000-12,
DATED 3/15/2000
TO: LOW INCOME HOME ENERGY ASSISTANCE PROGRAM (LIHEAP)
GRANTEES AND OTHER INTERESTED PARTIES
SUBJECT: LIHEAP Costs for Planning and Administration - Updated Information
RELATED
REFERENCES: Low Income Home Energy Assistance Act, Title XXVI
of the Omnibus Budget Reconciliation Act of 1981,
Public Law 97-35, as amended; the Personal
Responsibility and Work Opportunity Reconciliation
Act of 1996 (Public Law 104-193); Temporary
Assistance for Needy Families regulations at 45
CFR Parts 263 and 264, with accompanying preamble,
64 Federal Register 69, Part II, published April.
12, 1999 (pages 17808-17857 and 17893-17899);
Preamble to the final rule amending the HHS block
grant regulations, 52 Federal Register 37961-
37964, published October 13, 1987; FSA-IM-91-19,
"Use of Other Federal Funds for Costs Related to
LIHEAP Administration", issued on 4/11/91; and FSA-
IM-91-8, "LIHEAP Administrative Costs", issued on
12/27/90.
PURPOSE: To respond to requests for information on
Temporary Assistance for Needy Families
regulations defining administrative costs and how
it relates to LIHEAP, and to give grantees
previously issued administrative cost discussions
in one place for ready reference.
BACKGROUND: The LIHEAP statute limits the amount of LIHEAP
funds that grantees may use for planning and
administrative costs (referred to in this
transmittal for simplicity as "administrative
costs") to 10% of funds payable for a fiscal year.
Any costs in excess of this limit must be paid
from non-federal funds. (By regulation at 45 CFR
96.88, the administrative cost ceiling for tribal
and insular area grantees is 20% of the first
$20,000 and 10% of funds in excess of $20,000.
Otherwise, all statutory and regulatory provisions
concerning administrative costs apply to all
LIHEAP grantees.)
Neither the LIHEAP statute nor federal regulations
specify a definition for planning and
administrative costs. Instead, grantees are to
develop their own definitions, consistent with the
statute and regulations; we will defer to the
state's definition unless it is based on an
interpretation of the statute that is "clearly
erroneous".[45 CFR 96.50(e)]
A final regulation and its preamble published in
the Federal Register in 1987 (52 Federal Register
37961-37964, dated October 13, 1997) provided
guidance and clarification to grantees in defining
what constitutes administrative costs for the
LIHEAP program. We compiled this and other
guidance in a 1990 information memorandum (FSA-IM-
91-8, dated 12/27/90).
CONTENT: LIHEAP Requirements
Section 2605(b)(9) of the LIHEAP statute requires
grantees to assure that they will follow these
requirements:
(A) the State may use for planning and
administering the use of funds under this
title an amount not to exceed 10 percent of
the funds payable to such State under this
title for a fiscal year, and
(B) the State will pay from non-Federal
sources the remaining costs of planning and
administering the program assisted under
this title and will not use Federal funds
for such remaining cost (except for the
costs of the activities described in
paragraph (16));
The regulations at 45 CFR 96.88(a) state:
Any expenditure for governmental functions
normally associated with administration in
a public assistance program must be
included in determining administrative
costs subject to the statutory limitation
on administrative costs, regardless of
whether the expenditure is incurred by the
State, a subrecipient, a grantee, or a
contractor of the State. [emphasis added]
The preamble to this regulation provided
additional guidance (52 Federal Register 37961-
37964, published October 13, 1987), including
the following:
While we are not including the list of
specific functions in the final rule,
nonetheless, we believe that the costs
associated with those functions, i.e.,
taking applications, determining
eligibility and benefit levels, and
monitoring the assistance provided, are
normally administrative in a predominantly
cash assistance program, such as LIHEAP.
Consequently, we will carefully assess any
other categorization of these costs in our
compliance reviews and in our reviews of
audit findings.We will continue to examine
grantee programs on a case-by-case basis,
looking in particular to other State
programs that provide analogous benefits to
determine the appropriateness of the
State's definition of administrative costs
for LIHEAP.
...We agree that outreach activities are not
intrinsically administrative...The term
encompasses activities that are
administrative and others that are not.
New Information of Interest to Grantees
Under the federal welfare program Aid to Families
with Dependent Children (AFDC), all costs other
than cash benefit payments were classified as
administrative. Since the 1987 LIHEAP regulation
was published, AFDC has been replaced by the
Temporary Assistance for Needy Families (TANF)
program, which now is a primary Federal "public
assistance program".
Final TANF regulations were published April 12,
1999, and we have been asked whether those
regulations affect guidance for the LIHEAP program
relating to what constitutes "...governmental
functions normally associated with administration
in a public assistance program [that] must be
included in determining administrative costs
subject to the statutory limitation on
administrative costs..." The TANF regulations at
45 CFR 263.0(b) define administrative costs as
follows.
The term "administrative costs" means
costs necessary for the proper
administration of the TANF program, or
separate State programs.
(1) It excludes direct costs of providing
program services.
(i) For example, it excludes costs of
providing diversion benefits and
services, providing program information
to clients, screening and assessments,
development of employability plans, work
activities, post-employment services,
work supports, and case management. It
also excludes costs for contracts
devoted entirely to such activities.
(ii) It excludes the salaries and
benefits costs for staff providing
program services and the direct
administrative costs associated with
providing the services, such as the
costs for supplies, equipment, travel,
postage, utilities, rental of office
space and maintenance of office space.
(2) It includes costs for general
administration and coordination of these
programs, including contract costs and
all indirect (or overhead) costs.
Examples of administrative costs
include:
(i) Salaries and benefits of staff
performing administrative and
coordination functions;
(ii) Activities related to eligibility
determinations;
(iii) Preparation of program plans,
budgets, and schedules;
(iv) Monitoring of programs and
projects;
(v) Fraud and abuse units;
(vi) Procurement activities;
(vii) Public relations;
(viii) Services related to accounting,
litigation, audits, management of
property, payroll, and personnel.
(ix) Costs for goods and services
required for administration of the
program such as the costs for supplies,
equipment, travel, postage, utilities,
and rental of office space and
maintenance of office space, provided
that such costs are not excluded as a
direct administrative cost for providing
program services under paragraph (b)(1)
of this section
(x) Travel costs incurred for official
business and not excluded as a direct
administrative cost for providing
program services under paragraph (b)(1)
of this section;
(xi) Management information systems not
related to the tracking and monitoring
of TANF requirements (e.g., for a
personnel or payroll system for State
staff); and
(xii) Preparing reports and other
documents.
The TANF regulations at 45 CFR 263.13(b) state:
Expenditures on the information technology
and computerization needed for tracking or
monitoring required by or under part IV-A
of the Act do not count towards the limit
specified in paragraph (a) of this section
[setting a 15% limit on use of TANF funds
for administrative costs]."
The preamble to the TANF final rule at 64 FR
17811, published 69 (4/12/99), page 17811,
published April 12, 1999 provides this further
clarification on distinguishing "case management"
and "eligibility determination":
...Note: Here, we would make a distinction
between assessment activities designed to
identify needs and develop appropriate
service strategies versus assessing
income, resources, and documentation for
eligibility determination purposes; the
latter are administrative costs.
Please note that grantees continue to be the
primary interpreters of the LIHEAP statute,
and we will accept their interpretations of
the statute unless they are "clearly
erroneous". Grantees should consider whether
the new TANF regulations affect their
interpretation of what constitutes
administrative costs for the LIHEAP program.
Other Common Administrative Cost Issues
For your convenience, the information below
summarizes previous guidance on other
administrative cost issues.
Use of Other Federal Funds for Administrative
Costs
As noted above, the statute requires that
administrative costs in excess of the
administrative cost ceiling must come from non-
federal funds.
In 1991, the Government Accounting Office
issued a report, "Low Income Home Energy
Assistance: HHS Has Not Assured State
Compliance with Administrative Cost
Restrictions" (GAO/HRD-91-15). The issue
raised in the report involved a state's use of
Community Services Block Grant funds to
supplement the 10% of LIHEAP funds that the
state was using for LIHEAP administrative
costs. As a result, this office issued FSA-IM-
91-19, in which we reminded grantees that any
Federal funds used for LIHEAP administration
and planning must be applied to the 10% limit
on federal funds. The only exception to this
restriction is for costs associated with
administering Assurance 16 activities,
described below.
This means, for example, that CSBG funds may
not be used to administer LIHEAP if that will
put total Federal funds used for LIHEAP
administration costs over the 10% limit.
Direct and Indirect Costs
Grantees should note that neither the LIHEAP law
nor the LIHEAP regulations make any distinction
between direct and indirect costs. This
distinction is relevant only in determining which
activities - administrative or non-administrative
- are directly related to LIHEAP and which are
shared costs to be allocated among LIHEAP and
other programs. All direct costs and all indirect
costs attributable to LIHEAP administration must
be counted towards the 10% limit.
State vs. Local or Contractor Costs
Grantees should note that the regulation
explicitly requires that all costs for
administrative activities be counted toward the
maximum, whether they are incurred by state or
local agencies, or by contractors.
Activities Designed to Reduce Dependence on Energy
Assistance
Section 2605(b)(16) [Assurance 16] of the LIHEAP
statute creates an additional category of limited
funds. A State may:
use up to 5 percent of such funds, at its
option, to provide services that encourage
and enable households to reduce their home
energy needs and thereby the need for
energy assistance, including needs
assessments, counseling, and assistance
with energy vendors, and report to the
Secretary concerning the impact of such
activities on the number of households
served, the level of direct benefits
provided to those households, and the
number of households that remain unserved.
Other Federal funds (such as CSBG funds) may be
used to pay for the costs associated with
administering Assurance 16 activities, without
regard to the 10% limit on the use of federal
funds for planning and administration. However,
LIHEAP funds used to administer Assurance 16
activities do count against the 10% limit.
INQUIRIES TO: Janet M. Fox, Director
Division of Energy Assistance
Office of Community Services, ACF, HHS
370 L'Enfant Promenade, S.W.
Washington, D.C. 20447
Telephone: (202) 401-9351
Fax: (202) 401-5718
/s
Janet M. Fox
Director
Division of Energy Assistance
Office of Community Services
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